The Firm Under Uncertainty with General Risk-Averse Preferences: A State-Contingent Approach

This paper summarizes and synthesizes recent developments in the state-contingent theory of production under uncertainty presented by Chambers and Quiggin (2000) with a particular focus on the case of generalized expected utility preferences. The problem of the risk-averse firm under price and produ...

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Bibliographic Details
Published inJournal of risk and uncertainty Vol. 22; no. 1; pp. 5 - 20
Main Authors QUIGGIN, JOHN, CHAMBERS, ROBERT G.
Format Journal Article
LanguageEnglish
Published New York Kluwer Academic Publishers 01.01.2001
Springer Nature B.V
Subjects
Cost efficiency
Cost functions
Decision making
Economic analysis
Economic uncertainty
Equilibrium
Expectation
Expected utility
Hypotheses
Marginal costs
Mathematical models
Mathematical vectors
Modelling
Price uncertainty
Production functions
Production planning
Production theory
Random variables
Revenue
Risk
Risk assessment
Risk aversion
Risk premiums
Studies
Uncertainty
Utility theory
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Summary:This paper summarizes and synthesizes recent developments in the state-contingent theory of production under uncertainty presented by Chambers and Quiggin (2000) with a particular focus on the case of generalized expected utility preferences. The problem of the risk-averse firm under price and production uncertainty is analyzed using a state-contingent production technology and general risk-averse preferences. The concept of an efficient frontier, which identifies all potentially optimal production plans for weakly risk-averse decisionmakers, is introduced and used to develop comparative static results. For constant absolute risky technologies, the efficient frontier is shown to correspond to a unique isocost contour.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0895-5646
1573-0476
DOI:10.1023/A:1011180805925